The Hindu Business Line : Plan to run vehicles on ethanol blended petrol under review

THE Government is reviewing the ambitious programme to run automobiles on ethanol-doped petrol, a project which was launched by the previous NDA regime to reduce the country's dependence on imported crude oil.

The Petroleum Minister, Mr Mani Shankar Aiyar, has said that the review was necessitated due to poor sugarcane crop, limiting the availability of molasses and leading to spike in ethanol prices.

"We have not scrapped the ethanol programme. But we have called for a review to look at relative price of petrol and ethanol in view of limited supplies of molasses," he said.

A notification issued recently by the Petroleum Ministry does not make it mandatory for oil companies to blend ethanol with petrol. Ethanol should be procured only if it is economical and does not impact the fuel price, it says.

This makes ethanol mixing optional and the oil industry has dumped the exercise in most parts of the country due to difficulties faced in sourcing ethanol at high prices during the past six months.

India had planned to prune its over $19 billion oil import bill by mixing ethanol in petrol. But sugar (and ethanol) shortages have stalled the entire process.

The 5 per cent mandatory blending of ethanol with petrol would have created a demand for 3,600 lakh litres.

Mr Aiyar's predecessor Mr Ram Naik had introduced 5 per cent ethanol-doped fuel in nine sugarcane-producing States. It was to be introduced in the rest of the country in the second phase. The percentage of ethanol was to go up to 10 per cent and plans were made to extend it to diesel. However, the nation-wide roll-out never happened.

Mr Aiyar said prices of ethanol shot up as the alcohol industry had the first call on the limited molasses available due to poor sugarcane crop. "We want to extend the programme all over the country but ethanol availability is a constraint," he said.

Ethanol prices have increased by 100 per cent over the past year. Oil companies are still tendering for ethanol requirements, but procurements have dwindled as prices are ruling at Rs 19-20 per litre.

The oil companies are also handicapped by the removal of the Rs 350 per kilolitre excise duty exemption for ethanol-doped fuel.

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